Heilongjiang IPO 'delayed over corruption scandal'

Hong Kong listing will not happen until 2007, says member of restructuring team

Heilongjiang Beidahuang Agriculture, a former commercial unit of the Chinese army, has had its US$1 billion initial public offering slowed by a corruption scandal, sources said.

The firm, based in the provincial capital city of Harbin, was undergoing a restructuring in preparation to sell shares in Hong Kong.

That had been pushed back to next year 'if they are lucky', said a person involved with the restructuring.

'[The scandal] involves some senior management,' said a source, without elaborating.

Preparation for the offering was already going slow because the company, which also produces fertilisers and sells paper products, had previously been part of a commercial operation run by the People's Liberation Army before it was delegated to the local government.

Former president Jiang Zemin forced the army to give up its business activities in the late 1990s when many in the government felt the military was neglecting its official duties while corruption scandals involving the businesses it ran surfaced.

It is unclear at this point what assets Beidahuang plans to include in the sale or if its Shanghai-listed Heilongjiang Agriculture will be involved.

Gao Jianguo, the chief accountant for Shanghai-listed Heilongjiang Agriculture, said the firm failed in a bid for a Hong Kong listing in 1998 and it did not have any such plan at present.

'It is hard to say if we will ever do a listing in Hong Kong in the future but we are definitely not planning this at the moment,' Mr Gao said.

He said he did not think the parent company had any restructuring plans because its assets were all owned by the provincial government's finance department and any restructuring would be very complicated.

Mr Gao also said there was no government investigation into either the listed or the parent firm.

'It's possible the local government is restructuring a smaller subsidiary company like soyabean processing, dairy or flour production, but I've never heard anything about this,' he said.

Officials at the propaganda department, finance department and National Development and Reform Commission offices of the parent company said they had heard nothing about a Hong Kong listing or any scandal within the firm.

'The company has a lot of issues and there are a lot of things to do' before it would be ready for an initial public offering, said the source involved in the restructuring.

The company generated 4.05 billion yuan last year and trades at 14.7 times forecasts for this year.